Tax Tips - Personal Pension Plans

These tips are guidance only and do not constitute specific advice. Detailed professional advice should be taken before action or refraining from action.

As well as providing benefits upon retirement, personal pension plan contributions qualify for tax relief. Higher rate tax payers will get higher rate tax relief.

The maximum contributions payable are calculated by reference to your earnings, although anyone can contribute £3,600 gross (£2,880 net) to a stakeholder pension scheme regardless of their income, or 100% of earnings up to £245,000. It is not possible to use prior year earnings or to carry back contributions to earlier years.

Under stakeholder pension provisions all contributions are paid net of basic rate tax advancing the tax relief.

Higher rate taxpayers can claim additional tax relief of 20%, upon their Tax Returns. The FA 2009 restricts tax relief on earnings, for earnings above £150,000, anti-forestalling rules have been introduced. Therefore higher earners should seek advice as to how these changes affect their individual circumstances.